Insights

Decision Making for Companies with Multiple Owners

September 24, 2018

How do you handle success?

Construction companies have been good at tightening their belts to survive the lean times. However, now that financial results for most companies have improved, these times can be just as scary for the business owners, as they want to make sure they are making the right decisions about the future.

Do you add key management people, which will add to payroll?

Do you make investments in new equipment?

Do you make investments in additional technology?

Do you as the owner think about liquidating your ownership?

Do you want to grow the business locally or in new markets?

Do you want to add service lines to your business in areas where there are crossover services?

Many construction companies have multiple owners, and these type of decisions (above) have both short and long-term consequences. Not to mention that not all owners are always in agreement when it comes to these topics. Sometimes personal interest or family interest can affect how owners think about business decisions. How does your company make decisions?

One advantage of being a CPA firm that serves so many construction companies is that we get to see how different companies deal with decision making. We get to see a lot of what works and what does not work. While every company is unique, we’ve noticed some common traits from companies that are successful in navigating decision making with multiple owners.

There is at least one person who has a good general understanding of everything about the business and its owners. This includes understanding the operations, the financials, the tax effects, the key barriers to success, and the unique attributes and desires of the owners. Sometimes this is one of the owners, sometimes it is an outside advisor, like your CPA, or some other key management person.This person’s role is important, as no decision can be made in a vacuum and one decision often affects many other parts of the business. It is not until all those areas have been considered can you be confident in the decision. Many times we see the lack of this level of understanding causes paralysis on the part of the owners or leads to decisions that have unintended consequences.

There is open and honest communication amongst all owners about what they really want. It is easy to talk about working on a job or the day-to-day decisions that must be made to do business, however talking about what you want in the next five or 20 years can be much harder. Often, companies have owners who have different wants and needs for the future, which is fine as long as all owners are open and honest about these wants and needs. Avoiding the topic is not the right solution and only causes more issues as time passes. What people want changes with time. Owners need to communicate what they want and list those things in order of importance on a regular basis. We have seen many situations where there appeared to be significant differences about what people wanted, there were also some things of importance to each person that was common for all owners.

Decisions are aligned with moving the company forward in a successful way and with meeting the needs of the owners. If a decision does not do both, it will not be supported and will lead to further difficulties. Just putting the company first and ignoring the needs and wants of all the owners will work short term, but likely not work long term.

Decisions are implemented as soon as possible. Nothing can be worse than everyone deciding to do something and then having slow or no implementation efforts. Being intentional with an implementation plan is just as important as making a decision.

Plans include measurable outputs so they can tell if the decision made is achieving the desired results. The owners follow through and actually measure the results and discuss. This is very important for new initiatives to keep everyone engaged and in support of the plan, and it instills confidence that the plan is working.

They reevaluate things to see if there is a need to modify the plan. The owners accept that making changes to a plan does not mean the prior decision was wrong. The companies that are most successful are quick to make changes when the plans are not as effective as planned or when the factors that gave rise to the plan have changed. It is always true: you will know more six months from now than you know today.

If you would like to discuss decision making between your company owners or to know more about how we serve the whole client, please contact Stephen Mann (smann@blueandco.com) or your local Blue & Co. advisor. We are happy to discuss how we can help you and your company.

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